Thursday, March 6, 2008

Emily Battle posted on her blog at the FLS that the city is pursuing an ordinance change to implement a TIF (tax increment financing) district as a mechanism by which to supply the incentives to Kalahari.

I posted on Matt Kelly's blog, hoping that we'll get at least one counselor'sopinion on the changes. I'm a bit surprised that this is coming out this late in the game, and it does seem to me to be a game changer. There is no question that other localities have used TIFs to get developers to create certain businesses, however, it was my understanding that everything we wanted to do for Kalahari was possible under the existing city zoning and tourist zones. I wonder what the catch was? In trying to find if VA has any legal template for a TIF (vague if any), I did stumble on this 1988 VA attorney general opinion on the legality of TIFs. Seems that everything I can find about TIFs is that they use revenue generated from taxes over the original base tax revenue - where the development increases taxes from $1 to $3, the tax increment is $2. This $2 is then used to pay back bonds or to pay for incremental infrastructure improvements in the TIF. Hopefully council will quickly release some information about whether the full increment has to stay in the TIF zone, or can be used by the rest of the city (services, schools, etc). Also, what is the footprint of the TIF zone, just the 48 acres of Kalahari land, or is it bigger? If it's bigger, then how are the incentives structured - does Kalahari get up to 50% of it's taxes if the entire zone sees a benchmark tax increment met, or just the Kalahari property?

Wow, I thought the city had done a pretty good job of answering questions on the existing proposal (although it wasn't complete). I hope that they can do as good of job explaining this new ordinance and specifically how it's going to be structured for this specific deal. Unfortunately this is going to delay getting started on a project that is probably very dependent on meeting certain dates.

I'm assuming (and you know what happens when you assume) that this is a way to document tax revenue from Kalahari and set some portion of it aside in a fund to be returned as incentive. We do know that the TIF is a 'zone' that enables the city to do something with tax income increases. I haven't been able to find a TIF being used in a way that the city had previously pitched the incentives. Hopefully the FLS story tomorrow has some better research that I was able to find.

If there was NOT a TIF.. then the incentives .. if you think about it would function LIKE a TIF .. Kalahari pays taxes... and the city forks over incentives so they end up with less total tax collected (over time).

The TIF appears to be a formal codification of that concept.

Unless.. the city is giving incentives separate from the TIF district, in which case, it would appear that the project will operate without having to pay taxes at all - that it's worth it to the city to draw folks to Kalahari who will then buy other stuff in the retail around Kalahari.

Okay... if there is some doubt among those paying attention.. there has got to be even less appreciation of those not paying close attention...

if the city intends to follow-through on their promise to keep the public fully informed then they need a clear and concise statement to explain EXACTLY how the TIF district will work - and compare and contrast it to the previous approach.

I think what we have here is more than one cook in the kitchen.. and different ideas of the cooks as to how much should be made clear to the public but I could be wrong..

WOW - head spinning is more like it. Ok, so from what I read in the postponed agenda item posted on the city website, the TIF is the legal mechanism by which the city wants to collect $ from Kalahari and visitors. Then use this Tax Increment Financing Fund to fund the incentives back to Kalahari. The city has still failed to make a positive statement as to what happens to the money remianing in the fund after payment of the incentives? Do they convey directly to the general fund, are they allocated for specific activities? All these should be clearer by the April 8th public hearing. I guess I'll wait and see.

Larry/Etal--Sorry for the delay in responding--my other job as an insurance adjuster is now on the front burner as a result of a series of wind storms in the area. I can go into more detail later but I thought I would just point out that the TIF is only a mechanism to fulfill our financial obligations of the deal--the reimbursement of 47.5% of direct revenue. A TIF provides safeguards that ensure the transfer of funds. It does not represent a change in the deal. Also, to establish a TIF we will require a public hearing and vote. I would be happy to answer any questions you may have on this issue.